Ibovespa Falls on Economic Prospects as JBS Tumbles After Deal

The Ibovespa dropped as economists
covering Brazil cut their projections for growth and increased
estimates for the benchmark interest rate, dimming the outlook
for company earnings.

JBS SA (JBSS3) tumbled the most in six months after the world’s
largest beef producer agreed to buy meat-processing plants in
Brazil from Marfrig Alimentos SA. (MRFG3) Itau Unibanco Holding SA led
lenders lower after Standard & Poor’s last week revised its
credit outlook to negative.

The Ibovespa dropped 0.7 percent to 51,270.69 at 10:46 a.m.
in Sao Paulo, extending a two-day decline to 3 percent. Forty-nine of 71 stocks fell on the gauge. The real weakened 1 percent
to 2.1530 reais.

“Investors and economists are pessimistic about Brazil
now, and we don’t see any news or reason for it to be
different,” Alvaro Bandeira, a partner at Orama Asset
Management, said by phone from Rio de Janeiro. “Companies
should suffer from this scenario of low growth and rising
interest rates.”

Analysts reduced their projections for economic growth to
2.53 percent in 2013 from 2.77 percent while raising estimates
for the country’s year-end benchmark interest rate to 8.75
percent from 8.50 percent, according to a weekly survey by the
central bank posted today on its website.

JBS lost as much as 6.3 percent to 6.63 reais. Marfrig
soared as much as 9.4 percent to 8.15 reais. A close at that
level would be the highest since April 1. Itau fell 0.3 percent
to 31.17 reais.

The Ibovespa (IBOV) has slumped 19 percent from this year’s peak
on Jan. 3 amid concern accelerating inflation may curb Brazil’s
economic recovery and the government’s interventionist policies
will hurt profits in industries including utilities and energy.
The MSCI BRIC Index of shares in Brazil, Russia, India and China
has dropped 13 percent over the same period.

Brazil’s benchmark equity gauge trades at 11.2 times
analysts’ earnings estimates for the next four quarters,
compared with a 10.5 multiple for the MSCI Emerging Markets
Index of 21 developing nations’ equities, data compiled by
Bloomberg show.

Trading volume for stocks in Sao Paulo was 8 billion reais
on June 7, compared with a daily average of 7.71 billion reais
this year, according to data compiled by the exchange.